• ITVI.USA
    14,270.140
    -77.460
    -0.5%
  • OTRI.USA
    22.470
    0.090
    0.4%
  • OTVI.USA
    14,258.910
    -85.130
    -0.6%
  • TLT.USA
    2.790
    0.030
    1.1%
  • TSTOPVRPM.CHIATL
    3.280
    -0.100
    -3%
  • TSTOPVRPM.DALLAX
    1.460
    -0.040
    -2.7%
  • TSTOPVRPM.LAXSEA
    2.990
    -0.310
    -9.4%
  • TSTOPVRPM.PHLCHI
    1.970
    0.010
    0.5%
  • TSTOPVRPM.ATLPHL
    2.650
    -0.300
    -10.2%
  • TSTOPVRPM.LAXDAL
    2.490
    -0.200
    -7.4%
  • WAIT.USA
    127.000
    0.000
    0%
  • ITVI.USA
    14,270.140
    -77.460
    -0.5%
  • OTRI.USA
    22.470
    0.090
    0.4%
  • OTVI.USA
    14,258.910
    -85.130
    -0.6%
  • TLT.USA
    2.790
    0.030
    1.1%
  • TSTOPVRPM.CHIATL
    3.280
    -0.100
    -3%
  • TSTOPVRPM.DALLAX
    1.460
    -0.040
    -2.7%
  • TSTOPVRPM.LAXSEA
    2.990
    -0.310
    -9.4%
  • TSTOPVRPM.PHLCHI
    1.970
    0.010
    0.5%
  • TSTOPVRPM.ATLPHL
    2.650
    -0.300
    -10.2%
  • TSTOPVRPM.LAXDAL
    2.490
    -0.200
    -7.4%
  • WAIT.USA
    127.000
    0.000
    0%
American ShipperCybersecurityTechnologyTriumphPay

New freight benchmark study brings shippers’ payment practices into the light

A review of the JOC's just-released report: "Driving Strategic Value Through Outsourcing"

When it comes to freight audit and payment strategy, shippers don’t operate as a monolith. The Journal of Commerce (JOC) just released a freight payment benchmark study that brings urgent transparency to the payment practices of the shipper community. 

The study, “Driving Strategic Value Through Outsourcing,” written by Eric Johnson, senior technology reporter at the JOC, aggregates the responses of 77 shippers across all modes, nearly three-quarters of which generate $1 billion or more in annual revenue. 

While two-thirds of the respondents said they have outsourced either the audit or payment processes or both, outsourcing — and the benefits it generates — is concentrated among the larger shippers with more carriers to invoice. Smaller shippers are more likely to keep auditing and payments in-house and therefore don’t understand the benefits of outsourcing or the vast difference between vendors that are bank-backed and those that are not.

“It’s the perfect time for this study to be released.” said George Lorenze, vice president of business development at TriumphPay. “As shipper priorities have shifted to now emphasizing the security of funds and safety of banking data, the selection criteria they use in choosing an outsource payment processing vendor is also changing.”

Lorenze said the new selection criteria is based on three factors: the recent high-profile bankruptcies and frauds in the freight payment space, increased awareness around cybersecurity and ransomware attacks and the availability of early payment options—supply chain finance for carriers. 

Lorenze said the bankruptcies and frauds were all perpetrated by non-bank backed institutions, institutions not regulated by the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the U.S. Securities and Exchange Commission (SEC), or the Department of Homeland Security. The study revealed that only 21.9% of the shippers surveyed use a bank-backed vendor, and only 24% of the shippers surveyed believed being bank-backed was important. 

But the timing for this shift doesn’t seem to be spurred by COVID-19’s supply chain disruptions. Fewer than 10% of the shippers surveyed believed the pandemic would motivate them to change their existing audit or payment strategies. 

“I wasn’t really surprised that shippers didn’t change [their audit and payment practices relationships] specifically, because they have had so many other things to focus on, like how inventory was fluctuating,” said Haley Evans, vice president of sales at TriumphPay. “When you have a lot of your money in inventory, you can’t use it for anything else.”

Hannah Testani, Chief Operating Officer at Intelligent Audit, believes the 43.9% of shippers who don’t care whether or not they use a bank-backed payment vendor are acting irresponsibly with their money. “[Shippers] are taking so much money and pushing it through to an unregulated institution. Imagine taking your personal money and giving it to Joe Schmo down the street instead of putting in the bank. You would never do that.”

The study inquires into obvious benefits of outsourcing like reducing administrative costs, improving invoice accuracy and avoiding overpayment. Small and medium-size shippers who are more apt to process payments in-house are paying nearly double what the large shippers pay per outsourced invoice. Shipper respondents reported an average invoice inaccuracy rate of 20.8% — a figure that seemed low to both Johnson and Lorenze. 

An attractive benefit of the outsourced audit and payment process is having payment term flexibility for carriers, but the survey responses revealed that larger shippers tend to have longer payment terms than small to medium-size shippers, and 41.9% of shipper respondents were actively seeking to extend payment terms for their carriers. However, shippers that use bank-backed vendors pay carriers in an average of 41.7 days, as opposed to non-bank-backed vendors’ average of 47.3 days.

The study delves further into less obvious benefits of outsourcing, such as how the invoice data can be used to inform financial decisions, carrier selection and freight spend reductions. Nearly half (46.5%) of the shipper respondents use payment data for rate negotiations, while 16.3% use it to strategically select carriers and brokers. 

“There’s so much opportunity for shippers to reduce costs by just looking at their data and questioning why they have bad practices,” said Testani. “Intelligent Audit empowers shippers to make fact based decisions, rather than emotional decisions by standardizing their data and easily pointing out where there are opportunities for additional cost savings – ‘What carrier should I be using where? Where are they actually performing well? What are my actual costs per shipment?'”

Johnson hopes shippers will use this study as an evaluative tool to compare their spending on invoicing or to gauge how outsourcing would benefit their operation, since most of the market is moving in that direction. Payment processing has historically lived in the shadows of the back office, but outsourcing vendors, particularly those that are bank-backed, are exposing the enormous costs, errors and discrepancies of keeping payment and auditing in-house. 

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Corrie White

Corrie writes sponsored content for FreightWaves, covering freight technology, cross-border freight and the effects of consumer behavior on the freight industry. Alongside writing about transportation, she has published widely in literary magazines and teaches yoga. She holds degrees in English and Creative Writing from UNC Chapel Hill and UNC Greensboro.